Participation Cuts Both Ways; Another Take On "Meaningful Involvement"

Mark Dobosz

The FTC-CFPB Debt Collection Dialogue this week in Dallas discussed many areas of the debt collection process. One topic that was particularly interesting came out during the afternoon’s second panel dialogue.

The panel brought up the issue of default judgments and improving the engagement of consumers in the process of resolving legitimate debt obligations. Since the FTC’s document “Repairing the Broken System” came out five years ago, industry representatives have shared a number of initiatives for increased communications with consumers to address concerns expressed in that report regarding consumer involvement.

Both regulators and industry representatives on the panel acknowledged that consumer involvement in court proceedings continues to be an issue despite all of the efforts to improve the process. It was evident from the comments that increased utilization of empirical research would be key to solving a challenge in an environment where a plethora of anecdotes exist.

Chris Koegel of the FTC recommended that a collaborative (industry and consumer advocates), comprehensive, and detailed study of the issue of the lack of consumer engagement be undertaken immediately.  He additionally reinforced that rushing into solutions that do not base themselves on any existing or future research, and that do not otherwise shed light on the behavioral or practical reasons for the challenge, is misguided.

This recommendation is one that should be considered when applying labels to describe the perceived or real challenges for the creditor or the consumer in the debt collection process.

One example is how participation is defined, or not defined, for all parties. If a term will be used to define participation in the debt collection process, it should equally apply to not only the creditor but also to the consumer. In any relationship, contractual or otherwise, the responsibility to be “meaningfully involved” is not a one-sided equation. And if that premise is accepted, which I believe reasonable people would agree it should, then defining it needs to have a defensible background and basis upon which to use the term in defining acceptable behavior among both parties.

To Mr. Koegel’s point, addressing a challenging issue that does not have a clear cut definition requires both current and developing research to create a usable framework.

As Ben Golub, Assistant Professor of Economics at Harvard University, summarizes, “….when evidence is non-rigorously collected and there’s not a lot of it — we call the evidence anecdotal. (“I was walking around and it seemed that ladies out walking seem to be wearing red today.”) Such evidence has two features which make it relatively unappealing for scientific analysis. First, there’s not a lot of it, which makes precise inference difficult. Second, it has selection issues: whatever made it available or noticeable to the observer may be biasing the inferences drawn from it. In our example, red is a noticeable color, so unless you carefully documented all the ladies you saw, your generalization might be biased by that.” Quora July 2011

Regulators, in their collaboration with industry and consumer advocates, can benefit from the insights of the great work being done in sociology, psychology, and economics to create policy and regulations that truly improve the debt collection process and create a “level-playing” field for all. We can’t have an effective credit ecosystem unless both sides participate.